Chinese state owned enterprises in west africa triple embedded globalization

Chinese State-Owned
Enterprises in West Africa

This book investigates the globalization process of Chinese state-owned
enterprises (SOEs) in West Africa, primarily in Benin and Ghana, based on
ethnographical studies. It challenges the dominant vision of a powerful China
in Africa and argues that the so-called Chinese business advantages – the monolithic Chinese state and Chinese low-cost advantages – are not viable for sustaining
Chinese business development in the continent. Considering the Chinese SOE
globalization process in a relational approach, this book examines how the triple
embeddedness (Chinese, African and managerial) shapes the Chinese SOE globalization process over time and space, in diverse dimensions and among different
entities – the Chinese state, Chinese SOEs, Chinese expatriates, the African
government, African business partners, African staff and the African society. It
illustrates that the Chinese central state has “retreated” deliberately from its SOE
globalization in Africa. The Chinese SOEs and Chinese expats are the major
actors in initiating and inventing globalization strategies, facing limited Chinese
state support and the African neopatrimonial governance and social contexts.
Besides, the personal trajectories (from expatriation to social promotion) of
Chinese SOE expats interweave with the globalization-turn-localization of their
SOEs in Africa. Rejecting the linear, static and binary vision of a powerful China
in Africa, the present study thus emphasizes power dynamics in Chinese SOE
globalization process that are organic and pluralistic. Time and local relations
are key elements that constitute real Chinese advantages for Chinese SOEs visá-vis their ultimate competitors – not Western companies, but other Chinese
companies.
Katy N. Lam, Assistant Professor, Department of Applied Social Sciences, The
Hong Kong Polytechnic University.


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1 Chinese State-Owned Enterprises in West Africa
Triple-embedded globalization
Katy N. Lam


Chinese State-Owned
Enterprises in West Africa
Triple-embedded globalization

Katy N. Lam


First published 2017
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© 2017 Katy N. Lam
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Contents

List of figures
List of tables
List of abbreviations

Acknowledgments
1

viii
ix
x
xi

Introduction: a relational approach of Chinese
SOE globalization

1

1.1 Triple embeddedness: a relational approach
of Chinese SOE globalization 3
1.2 Countries of focus: Chinese SOEs in Benin
and Ghana 7
1.3 Outline of the book 9
2

Retreat of the Chinese state: history of Chinese
SOEs in West Africa

15

2.1 Chinese SOE reform: changing relationships
with the Chinese state 16
2.2 Chinese SOEs in the construction sector in Ghana 17
2.3 Chinese SOEs in the construction sector in Benin 29
2.4 Telecommunications sector 33

2.5 Close down: Chinese SOEs in light industry 37
2.6 Conclusion: retreat of the Chinese state and globalization of Chinese
SOEs in Africa 39
3

African embeddedness and vulnerable Chinese
3.1
3.2
3.3
3.4

African governance context for business 47
End of the so-called Chinese business advantage 49
Learning to play the game in Benin and Ghana 55
Cultivating government relations: politicians on the top 58

46


vi

Contents
3.5 Local embeddedness and structural roles for business
development 61
3.6 Everyday administration, everyday negotiation:
officials from below 63
3.7 Conclusion: toward a reconceptualization of
the real Chinese business advantages 66

4

African managers and workers: workforce localization
and becoming a paternalistic employer

72

4.1 Labor issues of China in Africa: beyond the
racialized stereotypes 72
4.2 Strategies of workforce localization of
Chinese SOEs 74
4.3 Learning to manage African workers 80
4.4 Localization of management: Ghanaian managers
in Chinese SOEs 88
4.5 Complete management localization in Chinese SOEs 91
4.6 Workforce localization: from a bottom-up strategy
to a top-down discourse 94
4.7 Conclusion: African managers – another real
Chinese business advantage 96
5

Chinese expats: social promotion and localization
in West Africa
5.1 Dynamics of spatial-social mobility 102
5.2 Overview of Chinese SOE expats in Benin
and Ghana 103
5.3 Expatriation in Africa and fulfilling social roles
in China 106
5.4 Africa, the best alternative 109
5.5 Intersection with SOE globalization-localization
and expatriation-migration in Africa 112

5.6 Globalization and expatriation: the limits
of social mobility 116
5.7 Conclusion: the paradox of social promotion
and localization 118

101


Contents
6

Competing for the “Chinese community”:
Chinese managerial agency

vii
121

6.1 Imagined Chinese community in Africa:
a stigmatized concept 122
6.2 Not the same Chinese: who are suzhi di
(of low quality)? 123
6.3 Localized SOEs and Chinese expats: creating visible
space and institutions for social differentiation 126
6.4 Building the Chinese community: dynamics between
the Chinese Embassy and Chinese SOEs 132
6.5 Localized SOEs and expats: a new Chinese
community leader 138
6.6 Conclusion: asserting (image) control and emerging power
dynamics between the Chinese state and its SOEs 143
7

Conclusion: second-class Chinese globalizations
in West Africa

148

7.1 A triple embeddedness approach 148
7.2 Reconceptualizing Chinese business advantages 151
7.3 Toward second-class Chinese globalizations in
West Africa 153
Bibliography
Index

156
166


Figures

1.1
1.2
1.3
4.1

Map of West Africa
Map of Benin
Map of Ghana
Ghanaian workers and a Pakistani technician of Sinohydro

10

11
12
77


Tables

2.1 List of Chinese construction SOEs active in Ghana as of 2014
2.2 List of Chinese construction SOEs (active/used to be active)
in Benin as of 2015
3.1 Business activities of some Chinese SOEs in Ghana
5.1 Minimum wage across Chinese provinces in early 2013

20
30
50
108


Abbreviations

Abbreviation Definition
CAD
CSR
CWE
ENR
FDI
FOCAC
GDP
MEI

MNC
MNE
MPT
NDC
NPP
ODI
OFDI
PRC
RMB
SASAC
SITEX
SOE
WEF
WTO
ZTE

China-Africa Development Fund
Corporate social responsibility
China Water and Electric Group
Engineering News Record
Foreign direct investment
Forum of China and Africa Cooperation
Gross domestic product
Ministry of Electronics Industry
Multinational corporation
Multinational enterprise
Ministry of Posts and Telecommunications
National Democratic Congress (party)
New Patriotic Party
Overseas direct investment

Outward foreign direct investment
People’s Republic of China
Renminbi (Chinese currency)
State Assets Supervision and Administration Commission
Société Industrielle du Textile
State-owned enterprise
World Economic Forum
World Trade Organization
Zhongxin Telecommunication Enterprises


Acknowledgments

This book is a shortened and revised version of my doctoral thesis. From research
to thesis and now to a book, throughout the journey I have received advice,
support and encouragement from mentors, colleagues, friends and family, without
whom this book would not have been possible. I am grateful to every one of
them, and I express my deepest gratitude especially to the following people:
Antoine Kernen, my thesis supervisor, who recruited me into the passionate
topic “China and Africa”. The research subject of this book was born,
developed and nourished by his insights in our numerous discussions.
Conducting the current research was possible thanks to the financial
support of the Swiss National Science Foundation, through the project
of “Chinese Presence in West Africa”, for which Antoine was the project
leader.
Françoise Bourdarias, Jean-Pierre Cabestan and François-Xavier Merrien,
my thesis jury, who provided valuable advice and encouragement for
improving the research in several critical phases over the years.
The Chinese in Ghana and Benin who welcomed me and generously shared
their experiences, aspirations and struggles of their African journeys.

Without them and their collaboration, conducting the ethnographical
fieldwork for this research would not have been possible. A special thanks
to Marine Michel, who kindly shared her research network and efforts
on Chinese in Benin, which were crucial for me in conducting the
fieldwork and developing the current research on Benin.
A post-doctoral fellowship under the Joint Research Group of Max Weber
Foundation of Germany and the Hong Kong Baptist University allowed
me to develop the current book from the thesis. I am particularly grateful to Adrian Bailey for his valuable comments on the book manuscript
and to Sabine Dabringhaus and Ricardo Mak for their helpful advice
and support during the fellowship.
Members of the Chinese in Africa/Africans in China Research Network,
notably Karsten Giese, Laurence Marfaing, Jamie Monson and Yoon
Jung Park, for their fruitful comments and exchange of ideas for advancing my research at different stages.


xii

Acknowledgments
My colleagues and friends at the University of Lausanne, Marion Repetti,
Marine Michel, Guive Khan, Antoine Guex, Angèle Mendy, Justine
Hirschy, Daniele Lopes, Pablo Diaz and Isabel Baumann, for making
the long writing process full of laughter and for understanding exactly
what I was going through.
My parents and my elder sister, Shirley, for their love and for laying an
important foundation of my education. My family-in-law for filling my
Swiss life with joys and warmth. I am particularly grateful to my parentsin-law, Isabelle and Pierre, for caring for me as their own daughter and
for always volunteering to look after their grandson so that I could
concentrate on writing.
Last, and most importantly, my husband, Simon, for his confidence and
support in every project I have pursued. He assumed my parenting role

during my regular and sometime lengthy absences from home for fieldwork and conferences, as well as numerous working weekends and holidays. He and our son Élie are the sources of joy, courage and energy
that brought this book to its completion.


1

Introduction
A relational approach of
Chinese SOE globalization

The idea that “China is powerful” has become beyond question since the beginning of the twenty-first century. The “rise of China”, the “China threat” and
“China’s plan to dominate” are among the popular topics of analysis and discussion.1 When it comes to Africa, China is even more prominently powerful.
The asymmetrical power dynamic is a prevailing feature over the decade of
China-Africa literature since 2006, the same year that numerous African leaders
participated in the high-profile political Forum on China and Africa Cooperation (FOCAC) held in Beijing.2 Since then, the power relationship between
China and Africa is often presented as unequal, with China being dominant and
Africa being weak, which is considered to differ little from the colonial pattern
of Western involvement in Africa (Tull 2006).
The perspective of “powerful China in Africa” can be subdivided into two
schools: pessimistic and optimistic. On one hand, the international attitude has
been disapproving and dismissive toward the role of China in Africa. The powerful Chinese presence in Africa is characterized as “offensive” (Niquet 2006,
Richer 2008), a “new scramble for Africa” (Frynas and Paulo 2006), and Africa
under control of China’s empire (Bertoncello and Bredeloup 2009, 46–47).
On the other hand, certain scholars maintain that China is the hope for Africa’s
development. They are positive about Chinese presence in the continent and
believe that Chinese engagement will contribute to a better African development
(like Brautigam 2009, Taylor 2009). These views about the encounter of China
and Africa, either pessimistic or optimistic, consider that the globalization of
Chinese investment is a decisive factor for Africa’s future, but the continent has
been passively responding to it or even is unable to manage it (e.g., Carmody

et al. 2010). The asymmetrical power dynamic has become a fundamental basis
in evaluating the role of China in Africa.
So how has the production of the imbalance of power dynamics taken place
on the ground? In reality, the relation between China and Africa is often presumed as unequal, though without solid empirical evidence, especially when
related to Chinese large or state-owned enterprises (SOEs). The Chinese largescale business in Africa is sometimes framed as “China Inc.” (Fishman 2005).
It is a famous icon of Chinese international business activities, implying that
Chinese overseas firms are orchestrated by a monolithic Chinese state with a


2

Introduction

coherent global political and economic strategy (Taylor and Xiao 2009). The
Chinese SOEs are presumed to enjoy the business advantages – Chinese political
and economic advantages in the continent. The role of the Chinese state in
Chinese SOEs is supposed to be omnipresent and highly supportive. Together
with the fact that the Chinese government provides unconditional aid to Africa,
Chinese SOEs are imagined to enjoy “competitive political advantage” (Alden
and Davies 2006, 6) compared to companies of other foreign countries. The
Chinese SOEs in Africa are taken as the army of China’s Africa policy and
strategy (e.g., Alden 2005, Carmody and Owusu 2007) and are seen as part of
China’s grand plan for natural resources in Africa.3 The globalization of Chinese
firms in Africa is interpreted as the rise of the Chinese state in the continent
(Carmody et al. 2012) and characterized as the spreading of Chinese state
capitalism (Davies 2010, The Economist 2012). Underlying this perspective is
the assumption that a strong, organized and controlling Chinese state is behind
the globalization activities of the Chinese SOEs.
Another so-called Chinese business advantage is the “comparative economic
advantage” (Alden and Davies 2006, 6), which is the low-cost advantage. Using

large number of cheap Chinese workers and mangers and inexpensive Chinamade products, the Chinese enterprises win projects through a lower bidding cost
than Western companies. These Chinese political and economic advantages are
presumably “taken for granted” foundations about China in Africa in media
reports and geopolitical analyses.
China Inc. (Silk and Malish 2006) and the “China shops phenomenon”
(Laribee 2008) remain the two prevailing and contrasting focuses and objects
of the China-Africa study. Most of the existing ethnographic studies focus on
the highly visible Chinese private traders operating business in large urban
markets in Africa.4 Their high visibility implies easily accessibility for research
investigation. The “hidden” ones – like the Chinese SOEs that do not operate
in visible markets – are rarely taken under the research scope for direct investigation. The studies concentrating the small-scale business actors do not pose
challenge to the dominant asymmetrical power dynamics, which often refer to
large Chinese investments and SOEs.
Being unable to effectively differentiate the Chinese government from its
state-owned enterprises remains a key barrier in evaluating China’s role in Africa.
The only effort made in separating the Chinese SOEs from the Chinese state
in the literature is for explaining the ineffectiveness of the Beijing diplomacy in
Africa, given that the negative image of China in Africa prevails. The Chinese
SOEs at the provincial level (省企), unlike the “good” Chinese central SOEs
(央企), are accused of being the “bad enterprises” and “freebooters” (Xu 2014)
because the Chinese central state has weaker control over them. In other words,
it is claimed that their autonomy from Chinese central state control leads to
unacceptable business behavior and creates international scandals in Africa (Gill
and Reilly 2007, Chen et al. 2010, Alden and Large 2011, Xu 2014). In reality,
among the widely reported Chinese-related conflicts in Africa, the Chinese
enterprises concerned are rarely related to Chinese provincial SOEs.5 The “bad


Introduction 3
provincial SOE” argument refers to (but again, there is lack of empirical evidence) the tension between Chinese central and provincial levels that is often

recorded in the China studies (e.g., Chung 1995, Li 2010). This tension is, in
fact, only one dynamic among many others.6 The internal Chinese ministerial
struggle, in contrast, may explain better the Beijing diplomatic challenge in
Africa (Brautigam 2009, Corkin 2011b).
Apart from a few eye-catching investment figures or labor conflicts with the
Chinese companies, a huge gap still exists in understanding the Chinese SOEs
in the continent, as in the world. Even for very simple information like who,
doing what business, and in which African country the Chinese SOEs are, no
study has ever been able to list out the Chinese SOEs and their business in an
African country until now, let alone their globalization history and experiences
in the continent.7 Without that information, the understanding of China in
Africa stays as the preassumed, untested asymmetrical dynamic – powerful China
versus weak Africa. This knowledge gap continues to hinder a more effective
collaboration among the international community, African countries and China
on the continent’s development.
This book is the first study investigating the Chinese SOE globalization
process in Africa through empirical research. It aims to demonstrate and explain
why many Chinese globalization patterns and dynamics take place, as to counterargue the dominant view of the asymmetrical power relation between China
and Africa. The book is based on first-hand materials collected from ethnographical investigations (interviews and participant observations) of Chinese
SOEs in Benin and Ghana of West Africa. The Chinese in Benin and Ghana
often express their difficulties in dealing with African actors and the competition
with other Chinese companies. Collaborating and even compromising with
African actors have been essential for the survival of Chinese businesses. The
revelation of an adaptive and struggling China, instead of a ruthless one, in
Benin and Ghana challenges the dominant vision of a powerful China in Africa.

1.1 Triple embeddedness: a relational approach
of Chinese SOE globalization
While “a totalitarian China state”8 is a popular media icon, scholars in China
studies have long rejected the idea that the Chinese state is a well-organized

and centralized unit that solely and closely controls national politics and the
economy. The Chinese central state and other Chinese political and economic
actors have developed complex and sometime conflicting relationships since the
Chinese economic reform of 1978. The nature of Chinese governance, instead
of being monolithic, is often characterized as, for instance, “fragmented authoritarianism” (Lieberthal and Oksenberg 1988), “pluralized” (Mertha 2008), power
decentralization/“federalism, Chinese style” (Montinola et al. 1995, Li 210,
179), “local state corporatism” (Oi 1992) and “polymorphous” (Howell 2006).
If Africa is viewed as dependent or weak when facing foreign actors. Africans
themselves have been active agents in the “mise en dépendance” of their societies


4

Introduction

(i.e., they have actively made themselves dependent on others) (Bayart 2000,
219). This mise en dépendance has been a long-term process dating back to
1870, when a large-scale colonization by European countries, “Scramble of
Africa”, took place. The external environment has been seen as an important
resource for political centralization and economic accumulation by African leaders, known as the politics of belly or extraversion strategies (Bayart 1989).
Mohan and Lampert (2013), for instance, introduce “African Agency” to the
China-Africa studies and highlight that facing the Chinese, African actors within
and beyond the (African) state level are able to exert agency power in order to
advance individual interest. Nevertheless, this prominent African governance
structure has yet been taken into account sufficiently in the China and
Africa study.
Highlighting a fragmented Chinese state and that power exists on the African
side is not to suggest a reverse asymmetry (a powerful Africa and a weak China),
but it emphasizes the “problem of embeddedness”; diverse contexts and social
relations play a significant role in shaping economic activities (Granovetter 1985,

Polanyi 2001). Economy has never been independent, but rather it is subordinated to society – its politics, religion and social relations cannot be autonomous
and separated from it (Polanyi 2001).
The present study takes a relational approach to look into the Chinese SOE
globalization process. Social relations are crucial to economic outcomes because
of their roles in information flow and verification, generating social capital,9
gaining trust and thus discouraging malfeasance, to name a few (Granovetter
1985, 2005). Power is a “relational effect of social interaction” and is transmitted only through “a succession of mediated relations” (Allen 2003, 2). Power
is not in things or just resources because we should not confuse “the exercise
of power” with “the resource capabilities mobilized to sustain that exercise”
(Allen 2003, 5). Social relation is the basis for mobilizing resources to sustain
the exercise of power. Social relation, for instance, is the ultimate business
competitive advantage (Burt 1992),10 and it can offset legitimacy issues of a
new company (Zaheer 1995). Storper (1997, 28) suggests a guiding metaphor
on understanding economy as “relation” and economic process as “conversation
and coordination”. Apart from material assets, the nature of economic accumulation is, more importantly, about “relational assets” (Storper 1997, 28).
Most Chinese SOEs in Benin and Ghana, as well as in Africa, are in fact
provincial in nature – they are either provincial SOEs or provincial branches of
Chinese central SOEs. Most of the Chinese SOEs are active in construction
and telecommunications sectors and operate outside the oil or natural resources
businesses. Close relation with the Chinese central state does not necessarily
produce globalization success in Africa. The key factor is the business duration
in the host country. Time is the ultimate variable of the Chinese SOE’s performance in Africa. The role of time reflects that the embeddedness of diverse
contexts and local assets in Africa, like relations and knowledge that require
time to cultivate and accumulate, are crucial in shaping globalization experience
and performance for Chinese SOEs.


Introduction 5
Therefore, this book investigates how embeddedness shapes the Chinese SOE
globalization process over time and, thus, reflects the real and changing ChinaAfrica power dynamics on the ground. In other words, it looks at how relations

and the ongoing dynamics condition Chinese SOE experience in Africa. Localization (or local embeddedness), however, “is not the only spatial logic of
embeddedness in globalization” (Hess 2004, 180). Embeddedness of globalization (spatial embeddedness) should be considered in three types: social, territorial
and network (Hess 2004). In this book, I rename them Chinese, African and
managerial embeddedness.
Chinese embeddedness (societal embeddedness) is the “genetic code” of a
Chinese SOE (Hess 2004, 176). It “signifies the importance of where an actor
comes from, considering the societal (i.e., cultural, political, etc.) background”
(Hess 2004, 176). Chinese embeddedness reflects where Chinese contexts –
including cultural, political and social-economic contexts –come from and how
these contexts shape globalization.
African embeddedness (territorial embeddedness) “considers the extent to
which an actor is ‘anchored’ in particular territories or places. Economic actors
become embedded there in the sense that they absorb, and in some cases become
constrained by, the economic activities and social dynamics that already exist in
those places” (Hess 2004, 177).
Entering into a new African country and market, a Chinese SOE has to
face two kinds of barriers: liability of newness and liability of foreignness.
Older organizations are in stronger relationships with local entities, especially
the power actors, and are viewed as legitimate. This legitimacy guarantees,
for example, a better access to resources that in turn increases their survival
chances (Singh et al. 1986, 173). Therefore, legitimacy is an age-dependent
external process, in other words, a time process. This explains why young
organizations usually have lower levels of legitimacy, which is a main challenge
for their adaptation (Singh et al. 1986). Additionally, being foreign companies,
the Chinese SOEs have to overcome one more barrier than a young domestic
organization: liability of foreignness (Zaheer 1995). Liability of foreignness is
the cost “of doing business abroad that result[s] in a competitive disadvantage
for an MN[C] subunit” (Zaheer 1995, 342–343). This competitive disadvantage is all the additional costs that a local firm does not need to incur, for
instance, the cost of unfamiliarity with and the “lack of roots in a local environment” and the “lack of legitimacy of foreign firms” (Zaheer 1995, 343).
Lack of legitimacy reflects that a new Chinese SOE subsidiary arriving to

Africa has insufficient local relations and, thus, trusts. If trust in this sense is
an essential element for the Chinese SOEs adaptation, part of the adaptation
process is to build and maintain trust, which is a time-consuming process. In
addition, both new and established Chinese SOEs may face one extra barrier –
“legitimacy spillovers”11 – because of the general negative Chinese image in the
continent (Mawdsley 2008).
Managerial embeddedness (network embeddedness) highlights the actors’
agency and interaction with other actors in local networks and trust building


6

Introduction

(Hess 2004, 177). In the present case, the actors are the Chinese SOEs African
subsidiaries and their Chinese directors and managers (Chinese expats) who
actually control the subsidiaries.
The local network of a Chinese SOE in Africa indicates how successful its
adaptation as well as its relationship with the headquarters are. The degree of
“local embeddedness” – local relations and business dependence in the hosting
country – is an indicator of successful adaptation for a multinational subsidiary
(Andersson and Forsgren 1996, 489–490). The more locally embedded a subsidiary is, the more successful is its business, and consequently the more autonomy
it gains from its headquarters. As a result, the degree of subsidiary local embeddedness reflects its relationship with its headquarters (Andersson and Forsgren
1996). Apparently, a more locally embedded subsidiary enjoys greater autonomy
from its headquarters. With a higher degree of local embeddedness, a subsidiary’s
local business performance is in general better (Andersson et al. 2002). The
subsidiary’s success in turn modifies its relationship with its headquarters (Andersson and Forsgren 1996, 504).
The substantial level of autonomy raises the question of agency problem.
Nonetheless, if the headquarter inserts too much direct control over the subsidiary, it will hinder the subsidiary in developing local embeddedness, and thus
business. Direct control, such as sending representatives from headquarters or

changing the subsidiary management regularly, will have a negative impact on
local embeddedness (Andersson et al. 2005, 524–525). In sum, the relationship
between a headquarters and its subsidiaries, in terms of control autonomy,
depends substantially on the degree of local embeddedness, which is critical for
a subsidiary’s business success (Andersson and Forsgren 1996, 493).
The three types of embeddedness – Chinese, African and managerial – shape
the Chinese SOE globalization process in Africa continuously and simultaneously
across time and space. Relational assets require time to build and to accumulate
(Storper 1997, Faist 2004), which means the power positions of the Chinese
SOEs and their Chinese managers will constantly reposition with time. Rejecting
the linear, static and binary power hierarchy of the powerful China and powerless Africa, I still emphasize that a power hierarchy does exist in the Chinese
SOE globalization in Africa. However, this China-Africa power dynamic is not
in a neat hierarchy but a chaotic and organic one. It is organic because actors
are positioned to act and react to change across time, because relational assets
can be cultivated and accumulated with time. It is chaotic because the action
of an actor depends on what resources are available for this person/SOE to act
on or react to or, in other words, what limits the person faces (Barth 1981,
Rosental 1996, 145). The result of such action is concurrently subject to parallel
actions or reactions of other actors; therefore, an individual is often uncertain
about the result of his or her action (Rosental 1996, 146). As Jessop put it,
globalization is a result of “the complex, contingent interaction of many different causal processes” (2002, 97–98). Chinese SOE globalization is not a
process with a single pattern or result; rather, there should be many and multiple
globalization dynamics taking place in Africa.


Introduction 7
Considering Chinese SOE globalization in a relational approach, this book
investigates how the triple embeddedness shapes the globalization process over
time, in diverse dimensions and among different entities – the Chinese state,
Chinese SOEs, Chinese expatriates, the African government, African business

partners, African staff and the African society. It argues that the Chinese central
state has “retreated” deliberately from its SOE globalization in Africa. The
Chinese SOEs and Chinese expats are the major actors in initiating and inventing globalization strategies, facing the limited Chinese state support and the
African neopatrimonial governance and social contexts (Bratton and van de
Walle 1997). Besides, the personal trajectories (from expatriation to social promotion) of Chinese SOE expats interweave with the globalization-turnlocalization of their SOEs in Africa. The triple embeddedness has made the
power dynamics of Chinese SOE globalization in Africa hierarchical, but in a
chaotic and organic sense. The so-called Chinese business advantages should be
reconceptualized from comparative (compare with other foreign companies) to
competitive (among Chinese SOEs). Apart from the fact that the Chinese state
support is limited, the Chinese low-cost strategy is not a viable advantage for
sustaining business given the fierce competition among Chinese SOEs in the
continent. As a result, the globalization process of the Chinese SOEs in Africa
can be characterized as “second-class” Chinese globalization. Second class is
not about a good or bad globalization; it is about how the Chinese SOEs in
Africa, with limited support and resources, have to cultivate and accumulate
assets to make their globalization succeed.

1.2 Countries of focus: Chinese SOEs in Benin12
and Ghana13
Benin and Ghana in West Africa are selected as countries of focus in the book.
There are a few reasons for the choice of Benin and Ghana. First, the economic
development and political stability of Benin and, especially in Ghana, and their
long-established diplomatic relations with China are favorable factors for Chinese
business development, thus providing substantial materials for the current study.
Second, Benin is not oil-producing and exporting country and Ghana was not
yet one at the time of my visit (2009–2010). The Jubilee Oil Field in Ghana
was discovered in 2007, and oil extraction started at the end of 2010. Chinese
business dynamics in Benin and Ghana have not yet been influenced or even
distorted too much by the controversial Chinese oil strategy in Africa, given that
most of the Chinese SOEs in reality do not operate in the African oil sector.

Benin established diplomatic relation with the People’s Republic of China
(mainland China) in 1964, several years after independence from French rule in
1960. However, the diplomatic tie was disrupted unilaterally by Benin in 1966.
Benin shifted its diplomatic ties with Taiwan. In 1972, the government of Mathieu
Kérékou restored the relational ties with the People’s Republic of China.14
In 1957, Ghana was the first country in Africa to gain independence from
British colonial rule. Strongly influenced by socialist ideas, the first Ghanaian


8

Introduction

president, Kwame Nkrumah, was close to communist countries. Those countries
included the People’s Republic of China, which established diplomatic relations
with Ghana in 1960. Chinese aid to Ghana started soon thereafter, in the form
of technical assistance on agriculture and manufacturing in the early 1960s.15
After the Nkrumah government was overthrown by a military coup during his
state visit in North Vietnam and China in 1966 (Buah 1998), the Ghana-China
diplomatic link was suspended and then reestablished in 1972.16
The total Chinese investments in Africa account for only a tiny fraction of
China’s global trade and investment, around 4 percent and 2.7 percent respectively
(Chinese State Council Information Office 2010, cited in Corkin 2013, 55). In
2010, only 3 percent ($68 billion17) of Chinese overseas direct investment (ODI),
which is 0.16% of the world ODI (Corkin 2013, Pairault 2013a), went to Africa.
Ghana ranks fourteenth among the top 15 African countries sharing this 3 percent
of the Chinese overseas investment. Benin is not in the top-15 list.
As of 2015, China ranks second largest in importers to Benin; France is the
largest. China receives the most Benin exportation after Niger, Bangladesh,
India and Vietnam.18 According to the Chinese Embassy in Ghana, total trade

volume between China and Ghana in 2013 is $5.15 billion, out of which
Chinese exportation to Ghana amounts to $3.95 billion, with a decrease of
17.6 percent compared to 2012, while Ghanaian exportation to China is $1.2
billion, an 86.7 percent increase from the previous year.19 Among the top 10
foreign investor countries in Ghana, in terms of number of investment projects,
China (with 52 projects) ranked second in 2013 (after India and before Lebanon). In terms of total financial volume, China ranks seventh (the first three
largest foreign investors in Ghana are the United States, Britain and Egypt)
(Ghana Investment Promotion Centre 2013).
In 2009 and 2010, I investigated the Chinese SOEs in Benin and Ghana
using an ethnographical method – semi-structured interviews and participant
observation.20 I conducted two field studies in Ghana and one in Benin that
stretched over more than a year.
Many written resources document the Chinese SOEs experience in Africa, and
most are in the Chinese language. However, secondary resources became useful
only after my fieldwork in Benin and Ghana, as without the field investigations
I could not have verified which Chinese SOEs were actually present in the African
countries. The website of the Chinese embassies in Benin and Ghana provided
some information and several lists of Chinese enterprises.21 The lists either mix
up state-owned and private enterprises (which I was only able to verify later
during field studies) or, if they are only about Chinese SOEs, they are incomplete
and outdated. Some Chinese SOEs that left upon termination of a project are
still present in the official list of the Chinese SOEs. Some SOEs are subcontractors of other Chinese SOEs in Benin and Ghana and are absent in the list.22
Websites of the Chinese SOEs provide extensive details on their history of enterprise restructuration and ownership transformation as well as internationalization
experiences. The information is essential to retracing the history of Chinese
SOE development and taking stock of their business in a particular African


Introduction 9
country. The Chinese embassies in Benin and Ghana frequently release public
communications on their activities, which regularly involve Chinese SOEs and

Chinese associations. The communications are helpful for analyzing the dynamics
between the Chinese SOE subsidiaries and the Chinese state representative – the
Chinese Embassy. Besides, Chinese media at the national, provincial and sectoral
levels report the Chinese SOE activities and experiences in Africa. In addition,
I also consulted Benin and Ghana media reports on Chinese business. Therefore,
from these resources, I had regular updates on Chinese SOE development in
the continent after my field trips terminated in 2010. Apart from these Internet
resources, I also relied on annual reports of the Chinese construction, fishery
and telecommunications sectors at the national and provincial levels since 1980,
as well as special reports and books on certain Chinese companies.

1.3 Outline of the book23
Chapter Two retraces the trajectories of how the Chinese SOEs in construction,
telecommunications and light industry sectors have arrived in Benin and Ghana
since the 1980s. It seeks to understand how and why the Chinese SOEs’ choice
of Benin and Ghana (and sometimes of Africa in general) as a destination for
globalization is situated in the Chinese institutional context, especially the context
of the history and evolution of Chinese outward foreign direct investment
(OFDI) policies and Chinese state sector reform.
Taking the Chinese SOEs as main actors in globalization, Chapters Three
and Four investigate how Chinese SOEs deploy business development strategies
in the African context. Chapter Three explores how their interactions with the
Beninese and Ghanaian government officials and business partners financed
projects and fierce competition among Chinese companies. Chapter Four investigates to what degree and how Chinese SOEs hire and manage local workers
and why some SOEs use local managers and target “complete localization” in
their African branches.
Chapter Five goes further to disaggregate Chinese SOEs by examining the
Chinese expatriates who run and possibly control the Chinese SOE subsidiaries
in Benin and Ghana. It illustrates the intersection of the Chinese SOE staff
trajectories of expatriation-social promotion and the Chinese SOEs’ globalization

and eventual localization in the African countries.
Chapter Six examines how localized and socially promoted Chinese SOE
directors have acquired leadership roles through their efforts to build a good
and socially acceptable Chinese community in collaboration with the Chinese
Embassy in Ghana. It provides another dimension for understanding of how
power relations are under constant negotiation and evolution in the Chinese
globalization process in Africa.
To conclude, in Chapter Seven I will propose three considerations for a new
perspectives on Chinese globalization in Africa.
Maps of West Africa (Figure 1.1), Benin (Figure 1.2) and Ghana (Figure 1.3)
are provided for the readers’ convenience.


Source: Geospatial Information Section, United Nations24

Figure 1.1 Map of West Africa


Figure 1.2 Map of Benin
Source: The World Fact Book, Central Intelligence Agency, United States25


Figure 1.3 Map of Ghana
Source: The World Fact Book, Central Intelligence Agency, United States26